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October 2015

China's Unisplendor agreed to pay $3.8 billion - a 30% premium - for 15% of hard drive maker Western Digital. Uniplendor is a subsidiary of Tsinghua Holdings which is controlled by the Chinese government.  This past May the company bought a 51% stake in Hewlett-Packard's Chinese server company H3C Technologies for $2.3 billion. The U.S. Committee on Foreign Investment has not yet approved the Western Digital deal. Note that Tsinghua had a failed bid on Micron Technology earlier this year.

September 2015

Did you know that fewer than 20% of the independent printed circuit fabricators in the U.S. are members of the IPC? Did you know that the IPC now has more "foreign" members than domestic ones? 

One has to wonder what value those off-shore interconnect firms see that the American board fabricators do not see. Is it because OEMs and EMS enterprises now view the PCB as a commodity? Is it because the IPC is not perceived as offering board builders much more than standards - or as much as the HKPCA and TPCA offer their PCB fabricating members? Is it because no independent fabricators are on the IPC board of directors to represent their needs? Is geography the issue? Is it the rapid change of technology? Is it because the cost of keeping processes and the factory floor up-to-date is too excessive?  Is it the squeeze on bare board margins? Is it because contract manufacturers (and OEMs) just view the bare board as a component that amounts to only 5% to 7% of the final assembly? Is it due to industry consolidation? Are regulatory burdens part of the problem?

What do you think? Is there a solution? Should there be a solution? What do YOU recommend? Write and tell us! Let your voice be heard!

Not even heavy downpours could not keep the crowds from the opening of the Design2Part show in Marlborough, Massachusetts on September 30. This year's event contained a number of EMS companies as well as both of the two prevalent 3D printer technologies (equipment sales as well as manufacturing services).  More than 10,000 3D printers were said to now be in place in industrial operations in North America.

A number of the contract manufacturers (mostly small and medium sized) were Mil Spec and medical supplier approved. These had learned to place the "super small" chips (e.g., chip resistors down to 0.024"L x 0.012" wide)that we are encountering more frequently.

The 3D folks are still focused on prototypes and short runs as the construct time is still very long per part (some were 10 or more hours). The process that melts plastic wire to build parts is still primarily restricted to thermoplastic resins (e.g., nylon, polycarbonate, etc.). The system that uses a laser to melt the material for part build-up can also process some metals (powdered) as well as thermoplastic resins.

Initial reports state that the SMTAI in Rosemont, Illinois event opened with good attendance. A lot of machinery was on the exhibit floor. The IPC (and other) meeting rooms were full. And, most notably, the retirement party for JoAnn Stromberg (who has guided the SMTA since its inception) was packed!

As I predicted

TTM Technologies will close three manufacturing plants and lay off 550 workers as part of a global integration plan following its June $927 million acquisition of Viasystems in June. The Juarex, Mexico plant will be closed, two facilities in Silicon Valley will be consolidated into a single operation, and a Cleveland facility will be merged into one in North Jackson, Ohio.

Taiwan's Chin-Poon Industrial announced that its August consolidated revenues increased 18.5% from a year earlier to $60.7 million. More than 70% of its sales come from the auto industry.

It is noteworthy that China's President Xi Jinping stopped in Seattle to meet with American business leaders and 5 state governors BEFORE going on to meet with President Obama in Washington, D. C.  On the first day of the visit, after announcing ing a new deal to work on clean energy, TerraPower, an energy company founded by Bill Gates, entered into an agreement with China National Nuclear Corporation to work together on next-generation technology for nuclear power plants.
China invested a record $83 billion in renewable energy last year, according to the Frankfurt School's Center for Climate and Sustainable Energy Finance in Germany.

Intel Capital announced from Beijing that it is investing $67 million in eight Chinese startups. It is the latest investment pledge from a U.S. technical company showing support for China’s domestic technical industry ahead of Chinese President Xi Jinping’s first state visit to the U.S. It follows Dell’s pledge to spend $125 billion there over the next 5 years.
Intel’s new China investments include Ninebot Inc., the Xiaomi backed scooter startup that acquired Segway in April, chip design firm Telink Semiconductor, and electronics makers Bluebank Communication Technology and Shenzhen Hampoo Science & Technology.

India’s premier Narendra Modi met with top Silicon Valley executives a few days after Chinese President Xi’s visit to Seattle. Modi spent several hours on Saturday talking to U.S. technology heavyweights that he believes can connect with *India’s technology start-up environment. Several of the leaders Modi met (e.g., Microsoft’s Satya Nadella, Google’s Sundar Pichai, and Adobe’s Shantanu Narayen) were born in India. Modi’s goal is to motivate India’s large and successful ex-patriots population to contribute to their home country’s development. Others on his schedule this trip included John Chambers of CiscoTim Cook of Apple, and Paul Jacobs of Qualcomm.

NOTE*The  Indian Space Research Organization just had a successful launch of the country's Multi Wavelength Space Observatory, ASTROSTAT.

More than 1,900 PCB designers, fabricators, and assemblers attended PCB West 2015 in Santa Clara. More than 100 companies exhibited their wares on the sold out show floor, while more than 30 designers underwent IPC certification during the UP Media Group sponsored event.

MIT has joined the $171 million consortium on manufacturing flexible electronics. It is one of several universities in Massachusetts that will support a new federal initiative to boost manufacturing innovation in the area of flexible hybrid electronics (FHEs). It will work closely with the University of Massachusetts at Amherst, the leader of the Massachusetts node of the collaboration, to support the Department of Defense funded Manufacturing Innovation Institute for Flexible Hybrid Electronics. The effort will be managed by FlexTech Alliance, a non-profit research and development group based in San Jose, California. The funding is composed of $75 million in federal grants and $96 million in private contributions. Boeing and General Motors are amongst the members of the consortium.

Ye Gads! Will it really be possible for most assembly houses to comply with the new EU Court of Justice ruling  on Article 33 of Regulation No 1907/2006, as amended about the calculation of levels of substances of very high concern (SVHCs) in articles under the Registration, Evaluation and Authorization of Chemicals (REACH) regulation?

The ruling says that producers must calculate the levels of SVHCs (substances of very high concern) in their products at the level of the "simple" article, rather than at the aggregate level of the "complex" article that is currently being used.

This means that manufacturers must understand and report the presence of candidate list SVHCs (the current count is 163) at a much lower level in their products than they generally currently do. This will require far more work, effort, and cost. So rather than disclosing only if the level of an SVHC is above 0.1% by weight of your entire product, you must disclose its presence for each wire, cable, plastic casing, etc. that contains it above 0.1% by weight.

First bare boards, then SMT, and now....

This month SEMI will lead a delegation of international microelectronics industry executives to Hanoi to explore growing opportunities in Vietnam's emerging electronics industry. The Ministries of Science and Technology and of Information and Communications as well as representatives of high-tech park developments will discuss semiconductor manufacturing  investment and expansion plans as well as "incentives" with the visitors. Registration for the SEMI Vietnam Business Mission is now available through SEMI. It is noteworthy that due to rising costs a number of PCB companies have pulled up stakes in China and moved to Vietnam or selected Vietnam for future expansion.

Back in the day...

I remember that, decades ago, the IPC sponsored a trade mission to China. Led by Ray Pritchard, it included meetings with the local trade association, several factory visits, a trade show, and an optional added tour. It was attended by a number of fabrication executives of the smaller and medium sized "shops".  They apparently learned little, took no notable positive defensive or aggressive strategic actions upon their return. As a result, most of the attending companies (Printed Circuit Corporation, Beaver Brook Circuits, Circuitwise, Velie Circuits, - and others) no longer exist. The lessons to be learned were not!

The industry has changed since those "pioneering" days. The center of gravity has shifted. Consolidation within the entire supply chain has driven margins down severely. It is more difficult to introduce new products. It is even more difficult to gain traction once a product has been "proven". Yet opportunities abound in wearable electronics, automotive electronics, power generation, as well as storage and distribution. It will take a new outlook, strategy, and reset of goals to partake in the potential successes. It will take an open mind and innovative business approaches to thrive in the new world of manufacturing  electronic devices. The IPC Ambassadors Council has proposed a number of actions that could increase the successes of its members. STAY TUNED!

Dr. Jin Zhang, President of PhiChem Corporation* announced that PhiChem has been accepted as a member of Underwriters Laboratories (UL®) Standards Technical Panel (STP) for Printed Wiring Boards STP796, which covers standards UL746E and UL796. UL746E is the UL Standard for Polymeric Materials – Industrial Laminates, Filament Wound Tubing, Vulcanized Fiber, and Materials Used in Printed-Wiring Board, while UL796 is the Standard for Printed-Wiring Boards. An STP is made up of qualified member companies that have a common interest or stake in maintaining particular standards. These companies are entrusted to manage changes in these standards under the chairmanship of the UL.

*Gene Weiner is Chairman of PhiChem's Advisory Board.

Advanced Semiconductor Engineering announced the official inauguration of ASE Embedded Electronics Incorporated, a new joint venture (JV) with TDK Corporation. The new JV will manufacture IC embedded substrates using TDK’s SESUB® (Semiconductor Embedded in SUBstrate) technology. The venture’s new facility will be located in the Nantze Export Processing Zone, Kaohsiung City, Taiwan.  ASE’s System-in-Package (SiP) solutions plans to use the SESUB technology in a wide number of applications including PMIC, sensors, and RF tuners.

August 2015

China's Xiaomi has teamed up with Foxconn to start assembling phones in India, to cut costs and grab a bigger slice of the world's third-largest smartphone market. India is the world's fastest growing smartphone market, but lacks good suppliers and infrastructure. It has more than 100 different phone companies which imports most heir smartphones from China and Taiwan. The first phone produced this month was the Redmi2 Prime priced at $110, an India-specific upgrade to its best-selling Redmi2 budget smartphone.

Panasonic has started to market a curved touch screen for automotive applications.

The Taiwan Printed Circuit Association (TPCA) is forecasting a PCB increase of just about 1.5% for 2015  due to a decline in demand for PCs. smartphones and notebook computers. Total production value for the year is estimated to total $17.6 billion.

Mitsubishi Chemical has introduced a see-through organic solar film.

As the world's markets continued to tumble and stumble late in August, China once again took action to attempt to shore up its economic plight by reducing bank reserve requirements by 1/2 a percentage point while its central bank cut interest rates by 1/4 of a point. The People's Bank of China also removed the ceiling on most bank deposits. Meanwhile, many of China's electronic supply chain participants continued to scramble in the face of reduced exports and higher costs.

Times have certainly changed! I never thought I would see the day when one of the world's most monolithic societies would elect a foreigner (gaijin) to the Board of Trustees of one of its trade associations.

Congratulations to Julian Bashore, Managing Director Japan of MacDermid Electronic Solutions, upon his election to the *JPCA's Board of Trustees. Bashore will join executives from such firms as Fujitsu, Ibiden, Meiko, and Nippon Mektron for a two year term.

*Japan Electronics Packaging and Circuits Association.

It’s almost "official "

The U.S. is now competitive with Chinese manufacturing according to the Boston Consulting Group (BSG). It is now barely cheaper to produce goods in China in the U.S.

The New York Times reported that the BSG says that manufacturing wages adjusted for productivity have nearly tripled in China over the last decade, from $4.35 an hour in 2004 to $12.47 in 2014. Meanwhile, U.S., manufacturing wages adjusted for productivity have risen less than 30 percent since 2004, to $22.32. However, these higher wages are offset by lower costs for energy and raw materials.

The net result is that the total cost to manufacture goods in China for every $1 required in the U.S. is now $0.96. Boston Consulting also states that the U.S. is becoming more competitive with other nations as well. It now costs more than $1 to manufacture goods in Korea for every $1 required in the U.S., and between $1.10 and $1.20 in Canada, Sweden, Japan, and the Netherlands. Further, for every $1 required in America, it costs between $1.20 and $1.30 to manufacture goods in Germany, Italy, Brazil, Belgium, France, and Switzerland. Only India and Indonesia of the “major nations” now cost less than $0.90 to produce products for every $1 needed in the U.S. , and India, with a large domestic market potential, still seems to lack the infrastructure needed to support “major” electronic manufacturing.

Does this make the U.S. truly competitive? Not when taxes, regulations, and lack of the requisite skilled educated labor pool is considered.

DKN Research reports that that sales of rigid printed circuit boards from Taiwan companies (Taiwan and China production) declined in April an May and now register a double digit decline from the same period last year.

"Equipment manufacturers and printed circuit manufacturers there released pessimistic forecasts for the second half of the year. They blame their pessimism on slow sales from personal computers, and they expect a negative growth from Tablet PCs this year." DKN believes that the business trends for Taiwan's printed circuit industry represent the global market trends for consumer electronics. For this reason, DKN does not have an optimistic outlook for the consumer electronics industry this year.

Advanced Semiconductor Engineering (ASE), the world’s largest chip packager and tester, yesterday said its revenue growth would slow this quarter. ASE just posted net income of $116.8 million, down 18% quarter-on-quarter and 28.5% from the previous year.

“At best, the situation in the first half can be described as an environment filled with mixed messages,” ASE chief operating officer Tien Wu said, citing a downturn in the PC industry and tight inventory controls in the semiconductor supply chain.* The company forecasted limited growth of 1%-5% for the 3rd quarter for its core integrated circuit assembly, test and material (IC ATM) business. This quarter, ASE’s EMS operations should increase 7%-8% from last quarter with a slight decline in gross margin.

*I wonder how much of the "mixed message" was really due to the Apple Watch's below break even level of 2 million units per month during the 2nd quarter. ASE uses SiP process in order to fit all the components and circuitry into the "watch's small space.

Recent major semiconductor IC industry consolidation activity

NXP is buying Freescale for $16.7 billion, Avago is buying Broadcom for $37 billion, Intel is buying Altera, GlobalFoundries was paid over $1B (by IBM) to "buy" IBM Microelectronics, and China's Tsinghua bid $23 billion for Micron Technology.